Four percent was wiped from HTC’s share price yesterday, after the company announced mixed fourth-quarter news. Shares fell to 133 New Taiwanese Dollars after HTC returned to profit, but only following the sale of its stake in American headphone maker Beats Electronics.
HTC recorded a profit of NT$310 million (€7.6 m/£6.3 m), after selling its Beats stake for NT$265 m (€15.2 m/£12.6 m). The previous quarter HTC reported a loss – the first in the company’s history.
With little set to change in the immediate future, it is highly possible that HTC will record another loss during the first quarter of 2014. However, there is then a strong opportunity for the company to return to profit.
In order to stem the decline, it is vital that HTC gets its 2014 smartphone releases right. Early this year, HTC will launch a new flagship Android smartphone – a replacement for the well-like HTC One.
Producing impressive handsets is something that HTC has a strong track record in. But to turn critical acclaim into sales, the company must increase consumer awareness of its products. This has been something that HTC has been working on in 2013, with strategies such as sponsorship of the UEFA Champions League.
Unlike many of its rivals, HTC has maintained production in-house. Although this has enabled the company to control quality effectively, HTC now recognises that it has also resulted in high financial costs.
Whilst HTC is likely to maintain some manufacturing capacity, it is likely that production will be increasingly outsourced. By relying more on third parties for production, HTC should be able to make significant savings.
There is also a side effect to outsourcing production that should also help HTC’s bid for growth.
Last year, many potential customers found it difficult to get their hands on phones like the HTC One and HTC One Mini, as a result of supply chain issues. As HTC makes ever-greater use of outsourcing, more of its supply chain will be managed externally, often by companies highly experienced in sourcing parts and planning production.